Document

CENTENNIAL, Colo.--(BUSINESS WIRE)-Aug 5, 2021--Arrow Electronics, Inc. (NYSE:ARW) today reported second-quarter 2021 sales of $8.56 billion, an increase of 30 percent from sales of $6.61 billion in the second quarter of 2020. Second-quarter net income was $241 million, or $3.23 per share on a diluted basis, compared with a net income of $133 million, or $1.68 per share on a diluted basis, in the second quarter of 2020. Non-GAAP net income1 was $249 million, or $3.34 per share on a diluted basis, in the second quarter of 2021, compared with non-GAAP net income of $126 million, or $1.59 per share on a diluted basis, in the second quarter of 2020.

“Arrow reported record results this quarter, reflecting our constant efforts to capture new growth opportunities and harvest the benefits as leaders of information and operational technology innovation,” said Michael J. Long, chairman, president, and chief executive officer. “We believe that financial performance is directly linked to the value we deliver to customers and suppliers, making our achievement of the highest sales, gross profit and earnings per share for any quarter in Arrow’s history a true testament to the hard work and commitment of our team. We look forward to driving further success for our customers, as well as all our company’s stakeholders as we continue to advance our strategic priorities.”

Global components second-quarter sales of $6.61 billion reflected an increase of 40 percent year over year and non-GAAP sales increased 36 percent year over year. Asia-Pacific components second-quarter sales increased 49 percent year over year and non-GAAP sales in the region increased 47 percent year over year. Americas components second-quarter sales increased 32 percent year over year. Europe components second-quarter sales increased 33 percent year over year and non-GAAP sales in the region increased 22 percent year over year. Global components second-quarter operating income was $327 million, and second-quarter non-GAAP operating income was $339 million.

Global enterprise computing solutions second-quarter sales of $1.95 billion reflected an increase of 4 percent year over year and non-GAAP sales decreased 1 percent year over year. Europe enterprise computing solutions second-quarter sales increased 19 percent year over year and non-GAAP sales in the region increased 8 percent year over year. Americas enterprise computing solutions second-quarter sales decreased 5 percent year over year. Global enterprise computing solutions second-quarter operating income was $81 million, and second-quarter non-GAAP operating income was $83 million.

“Enhancing shareholder value remains a top priority. With a strong balance sheet and liquidity position, our return on invested capital increased year over year for the fifth straight quarter,” said Chris Stansbury, senior vice president and chief financial officer. “We are pleased our strong financial returns, positive cash flow from operations, and the effective management of our balance sheet enabled us to deliver on our commitment to returning cash to shareholders through an additional $600 million repurchase authorization on July 21. During the second quarter, we repurchased a single-quarter record of approximately $250 million of shares through our stock repurchase program. Our current repurchase authorization stands at approximately $663 million.”

This press release includes “forward-looking” statements, as the term is defined under the federal securities laws, including but not limited to statements regarding: Arrow’s future financial performance, including its outlook on financial results for the third quarter of fiscal 2021, such as sales, net income per diluted share, non-GAAP net income per diluted share, average tax rate, average diluted shares outstanding, interest expense, average USD-to-Euro exchange rate, impact to sales due to changes in foreign currencies, intangible amortization expense per diluted share, restructuring and integration charges per diluted share, and expectation regarding market demand. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, industry conditions, changes in product supply, pricing and customer demand, competition, other vagaries in the global components and global enterprise computing solutions markets, changes in relationships with key suppliers, increased profit margin pressure, foreign currency fluctuation, changes in legal and regulatory matters, non-compliance with certain regulations, such as export, anti-trust, and anti-corruption laws, foreign tax and other loss contingencies, and the company's ability to generate cash flow. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company's periodic reports on Form 10-K and Form 10-Q and subsequent filings made with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.

The company provides non-GAAP sales, gross profit, operating income, income before income taxes, provision for income taxes, net income, and net income per share on a diluted basis which are adjusted GAAP measures for the impact of changes in foreign currencies (referred to as "changes in foreign currencies") by re-translating prior period results at current period foreign exchange rates and the impact of notes receivable reserves and recoveries related to the AFS business (referred to as “AFS notes receivable reserves and recoveries”). Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other charges, AFS notes receivable reserves and recoveries, impairment of long-lived assets, and the impact of wind down. Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders excludes identifiable intangible asset amortization, restructuring, integration, and other charges, gain (loss) on investments, net, the impact of tax legislation changes, AFS notes receivable recoveries, the impact of impairments of long-lived assets, pension settlement loss, and the impact of wind down.

The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company’s operating performance and underlying trends in the company’s business because management considers these items referred to above to be outside the company’s core operating results. This non-GAAP financial information is among the primary indicators management uses as a basis for evaluating the company’s financial and operating performance. In addition, the company’s Board of Directors may use this non-GAAP financial information in evaluating management performance and setting management compensation.


ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)

	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020

Sales	$	8,562,631	$	6,606,494	$	16,948,550	$	12,987,911
Cost of sales	7,562,526		5,856,031		15,018,335		11,509,057
Gross profit	1,000,105		750,463		1,930,215		1,478,854
Operating expenses:
Selling, general, and administrative expenses	602,084		501,470		1,176,651		1,035,309
Depreciation and amortization	48,539		46,812		98,870		93,922

Impairments	4,482		4,918		4,482		4,918
Restructuring, integration, and other charges	4,478		650		10,187		9,788
	659,583		553,850		1,290,190		1,143,937
Operating income	340,522		196,613		640,025		334,917
Equity in earnings (losses) of affiliated companies	190		(283)		1,034		247
Gain (loss) on investments, net	6,726		10,901		9,519		(5,909)

Employee benefit plan expense, net	(1,438)		(1,173)		(2,668)		(2,282)
Interest and other financing expense, net	(30,685)		(31,867)		(64,341)		(75,135)
Income before income taxes	315,315		174,191		583,569		251,838
Provision for income taxes	74,113		40,854		135,139		68,746
Consolidated net income	241,202		133,337		448,430		183,092
Noncontrolling interests	561		533		1,468		785
Net income attributable to shareholders	$	240,641	$	132,804	$	446,962	$	182,307

Net income per share:
Basic	$	3.27	$	1.69	$	6.02	$	2.29
Diluted	$	3.23	$	1.68	$	5.94	$	2.28

Weighted-average shares outstanding:
Basic	73,693		78,677		74,294		79,527
Diluted	74,611		79,226		75,197		80,113


ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)

	July 3, 2021		December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents	$	244,070	$	373,615
Accounts receivable, net	8,846,715		9,205,343
Inventories	3,636,082		3,287,308
Other current assets	355,757		286,633
Total current assets	13,082,624		13,152,899
Property, plant, and equipment, at cost:
Land	5,691		7,940
Buildings and improvements	184,676		207,614
Machinery and equipment	1,530,544		1,553,371
	1,720,911		1,768,925
Less: Accumulated depreciation and amortization	(993,500)		(969,320)
Property, plant, and equipment, net	727,411		799,605
Investments in affiliated companies	68,937		76,358
Intangible assets, net	214,261		233,819
Goodwill	2,106,182		2,115,469
Other assets	643,358		675,761
Total assets	$	16,842,773	$	17,053,911
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	7,625,844	$	7,937,889
Accrued expenses	1,089,866		1,034,361
Short-term borrowings, including current portion of long-term debt	356,986		158,633
Total current liabilities	9,072,696		9,130,883
Long-term debt	1,884,393		2,097,940
Other liabilities	661,223		676,136
Commitments and contingencies
Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2021 and 2020
Issued - 125,424 shares in both 2021 and 2020	125,424		125,424
Capital in excess of par value	1,175,470		1,165,850
Treasury stock (53,286 and 50,581 shares in 2021 and 2020, respectively), at cost	(3,134,484)		(2,776,821)
Retained earnings	7,126,713		6,679,751
Accumulated other comprehensive loss	(128,201)		(104,885)
Total shareholders’ equity	5,164,922		5,089,319
Noncontrolling interests	59,539		59,633
Total equity	5,224,461		5,148,952
Total liabilities and equity	$	16,842,773	$	17,053,911


ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Quarter Ended
	July 3, 2021		June 27, 2020
Cash flows from operating activities:
Consolidated net income	$	241,202	$	133,337
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization	48,539		46,812
Amortization of stock-based compensation	8,744		8,397
Equity in (earnings) losses of affiliated companies	(190)		283
Deferred income taxes	(1,594)		13,732
Impairments	4,482		4,918



Gain on investments, net	(6,726)		(10,885)



Other	277		253
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable, net	(313,735)		(112,437)
Inventories	(357,065)		(80,465)
Accounts payable	562,461		292,024
Accrued expenses	79,459		102,369
Other assets and liabilities	15,526		19,907
Net cash provided by operating activities	281,380		418,245
Cash flows from investing activities:


Acquisition of property, plant, and equipment	(20,929)		(31,571)


Net cash used for investing activities	(20,929)		(31,571)
Cash flows from financing activities:
Change in short-term and other borrowings	(2,379)		77,165
Proceeds from (repayments of) long-term bank borrowings, net	(20,433)		(123,113)

Redemption of notes	—		(209,366)
Proceeds from exercise of stock options	15,226		1,750
Repurchases of common stock	(250,708)		(72,750)
Settlement of forward-starting interest rate swap	—		(48,378)
Other	(159)		(141)
Net cash used for financing activities	(258,453)		(374,833)
Effect of exchange rate changes on cash	14,371		(7,011)
Net increase in cash and cash equivalents	16,369		4,830
Cash and cash equivalents at beginning of period	227,701		200,998
Cash and cash equivalents at end of period	$	244,070	$	205,828


ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended
	July 3, 2021		June 27, 2020
Cash flows from operating activities:
Consolidated net income	$	448,430	$	183,092
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization	98,870		93,922
Amortization of stock-based compensation	21,967		22,317
Equity in earnings of affiliated companies	(1,034)		(247)
Deferred income taxes	12,069		46,345
Impairments	4,482		4,918



Loss (gain) on investments, net	(9,519)		5,925



Other	1,651		48
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable, net	283,042		446,168
Inventories	(370,212)		52,927
Accounts payable	(277,663)		(51,027)
Accrued expenses	83,102		71,043
Other assets and liabilities	(18,341)		9,679
Net cash provided by operating activities	276,844		885,110
Cash flows from investing activities:


Acquisition of property, plant, and equipment	(41,109)		(59,542)
Proceeds from sale of property, plant, and equipment	22,171		—
Other	—		(5,466)
Net cash used for investing activities	(18,938)		(65,008)
Cash flows from financing activities:
Change in short-term and other borrowings	(14,831)		(7,189)
Proceeds from (repayments of) long-term bank borrowings, net	134,241		(411,690)

Redemption of notes	(130,860)		(209,366)
Proceeds from exercise of stock options	41,317		3,730
Repurchases of common stock	(411,327)		(231,739)
Settlement of forward-starting interest rate swap	—		(48,378)
Other	(159)		(141)
Net cash used for financing activities	(381,619)		(904,773)
Effect of exchange rate changes on cash	(5,832)		(9,604)
Net decrease in cash and cash equivalents	(129,545)		(94,275)
Cash and cash equivalents at beginning of period	373,615		300,103
Cash and cash equivalents at end of period	$	244,070	205,828


ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
	Quarter Ended
	July 3, 2021		June 27, 2020		% Change

Consolidated sales, as reported	$	8,562,631	$	6,606,494	29.6	%
Impact of changes in foreign currencies	—		218,616


Non-GAAP consolidated sales	$	8,562,631	$	6,825,110	25.5	%

Global components sales, as reported	$	6,610,761	$	4,721,255	40.0	%
Impact of changes in foreign currencies	—		133,141


Non-GAAP global components sales	$	6,610,761	$	4,854,396	36.2	%

Americas components sales, as reported	$	1,970,756	$	1,488,901	32.4	%
Impact of changes in foreign currencies	—		637


Non-GAAP Americas components sales	$	1,970,756	$	1,489,538	32.3	%

Europe components sales, as reported	$	1,490,662	$	1,118,417	33.3	%
Impact of changes in foreign currencies	—		106,199


Non-GAAP Europe components sales	$	1,490,662	$	1,224,616	21.7	%

Asia components sales, as reported	$	3,149,343	$	2,113,937	49.0	%
Impact of changes in foreign currencies	—		26,305


Non-GAAP Asia components sales	$	3,149,343	$	2,140,242	47.1	%

Global ECS sales, as reported	$	1,951,870	$	1,885,239	3.5	%
Impact of changes in foreign currencies	—		85,475


Non-GAAP global ECS sales	$	1,951,870	$	1,970,714	(1.0)	%

Europe ECS sales, as reported	$	784,515	$	661,983	18.5	%
Impact of changes in foreign currencies	—		66,164


Non-GAAP Europe ECS sales	$	784,515	$	728,147	7.7	%

Americas ECS sales, as reported	$	1,167,355	$	1,223,256	(4.6)	%
Impact of changes in foreign currencies	—		19,311


Non-GAAP Americas ECS sales	$	1,167,355	$	1,242,567	(6.1)	%


ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
	Six Months Ended
	July 3, 2021		June 27, 2020		% Change

Consolidated sales, as reported	$	16,948,550	$	12,987,911	30.5	%
Impact of changes in foreign currencies	—		421,289


Consolidated sales, as adjusted	$	16,948,550	$	13,409,200	26.4	%

Global components sales, as reported	$	13,054,014	$	9,271,856	40.8	%
Impact of changes in foreign currencies	—		263,439


Global components sales, as adjusted	$	13,054,014	$	9,535,295	36.9	%

Americas components sales, as reported	$	3,671,929	$	3,041,699	20.7	%
Impact of changes in foreign currencies	—		346


Americas components sales, as adjusted	$	3,671,929	$	3,042,045	20.7	%

Europe components sales, as reported	$	3,059,264	$	2,428,407	26.0	%
Impact of changes in foreign currencies	—		221,483


Europe components sales, as adjusted	$	3,059,264	$	2,649,890	15.4	%

Asia components sales, as reported	$	6,322,821	$	3,801,750	66.3	%
Impact of changes in foreign currencies	—		41,610


Asia components sales, as adjusted	$	6,322,821	$	3,843,360	64.5	%

Global ECS sales, as reported	$	3,894,536	$	3,716,055	4.8	%
Impact of changes in foreign currencies	—		157,850


Global ECS sales, as adjusted	$	3,894,536	$	3,873,905	0.5	%

Europe ECS sales, as reported	$	1,575,843	$	1,364,111	15.5	%
Impact of changes in foreign currencies	—		125,964


Europe ECS sales, as adjusted	$	1,575,843	$	1,490,075	5.8	%

Americas ECS sales, as reported	$	2,318,693	$	2,351,944	(1.4)	%
Impact of changes in foreign currencies	—		31,886


Americas ECS sales, as adjusted	$	2,318,693	$	2,383,830	(2.7)	%


ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)

Three months ended July 3, 2021
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Other(1)		Non-GAAP measure
Sales	$	8,562,631		$	—	$	—	$	—	$	—	$	—	$	—	$	8,562,631
Gross Profit	1,000,105			—		—		—		—		—		—		1,000,105
Operating income	340,522			9,316		4,478		—		4,482		—		—		358,798
Income before income taxes	315,315			9,316		4,478		—		4,482		—		(6,545)		327,046
Provision for income taxes	74,113			2,382		1,010		—		1,078		—		(1,575)		77,008
Consolidated net income	241,202			6,934		3,468		—		3,404		—		(4,970)		250,038
Noncontrolling interests	561			150		—		—		—		—		—		711
Net income attributable to shareholders	$	240,641		$	6,784	$	3,468	$	—	$	3,404	$	—	$	(4,970)	$	249,327
Net income per diluted share (3)	$	3.23		$	0.09	$	0.05	$	—	$	0.05	$	—	$	(0.07)	$	3.34
Effective tax rate (4)	23.5		%													23.5		%

Three months ended June 27, 2020
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Other(2)		Non-GAAP measure
Sales	$	6,606,494		$	—	$	—	$	—	$	—	$	—	$	—	$	6,606,494
Gross Profit	750,463			—		—		—		—		(10,696)		—		739,767
Operating income	196,613			9,734		650		197		4,918		(11,824)		—		200,288
Income before income taxes	174,191			9,734		650		197		4,918		(11,814)		(10,901)		166,975
Provision for income taxes	40,854			2,501		313		47		1,800		(2,662)		(2,631)		40,222
Consolidated net income	133,337			7,233		337		150		3,118		(9,152)		(8,270)		126,753
Noncontrolling interests	533			137		—		—		—		—		—		670
Net income attributable to shareholders	$	132,804		$	7,096	$	337	$	150	$	3,118	$	(9,152)	$	(8,270)	$	126,083
Net income per diluted share (3)	$	1.68		$	0.09	$	—	$	—	$	0.04	$	(0.12)	$	(0.10)	$	1.59
Effective tax rate (4)	23.5		%													24.1		%


ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)

Six months ended July 3, 2021
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Non-recurring tax items		Other(1)		Non-GAAP measure
Sales	$	16,948,550		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	16,948,550
Gross Profit	1,930,215			—		—		—		—		—		—		—		1,930,215
Operating income	640,025			18,642		10,187		—		4,482		—		—		—		673,336
Income before income taxes	583,569			18,642		10,187		—		4,482		—		—		(9,338)		607,542
Provision for income taxes	135,139			4,767		2,176		—		1,078		—		—		(2,247)		140,913
Consolidated net income	448,430			13,875		8,011		—		3,404		—		—		(7,091)		466,629
Noncontrolling interests	1,468			300		—		—		—		—		—		—		1,768
Net income attributable to shareholders	$	446,962		$	13,575	$	8,011	$	—	$	3,404	$	—	$	—	$	(7,091)	$	464,861
Net income per diluted share (3)	$	5.94		$	0.18	$	0.11	$	—	$	0.05	$	—	$	—	$	(0.09)	$	6.18
Effective tax rate (4)	23.2		%															23.2		%

Six months ended June 27, 2020
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Non-recurring tax items		Other(2)		Non-GAAP measure
Sales	$	12,987,911		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	12,987,911
Gross Profit	1,478,854			—		—		—		—		(10,696)		—		—		1,468,158
Operating income	334,917			19,689		9,788		(723)		4,918		(11,824)		—		—		356,765
Income before income taxes	251,838			19,689		9,788		(723)		4,918		(11,814)		—		5,909		279,605
Provision for income taxes	68,746			5,065		2,884		(175)		1,800		(2,662)		(3,615)		1,426		73,469
Consolidated net income	183,092			14,624		6,904		(548)		3,118		(9,152)		3,615		4,483		206,136
Noncontrolling interests	785			274		—		—		—		—		—		—		1,059
Net income attributable to shareholders	$	182,307		$	14,350	$	6,904	$	(548)	$	3,118	$	(9,152)	$	3,615	$	4,483	$	205,077
Net income per diluted share (3)	$	2.28		$	0.18	$	0.09	$	(0.01)	$	0.04	$	(0.11)	$	0.05	$	0.06	$	2.56
Effective tax rate (4)	27.3		%															26.3		%



























(1) Other includes (gain) loss on investments, net and pension settlement loss.
(2) Other includes (gain) loss on investments, net
(3) In all periods presented the sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(4) The items as shown in this table, represent the reconciling items for the tax rate as reported by GAAP measure and as a non-GAAP measure.


ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)

	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Sales:
Global components	$	6,610,761	$	4,721,255	$	13,054,014	$	9,271,856
Global ECS	1,951,870		1,885,239		3,894,536		3,716,055
Consolidated	$	8,562,631	$	6,606,494	$	16,948,550	$	12,987,911
Operating income (loss):
Global components (a)	$	327,036	$	181,836	$	616,419	$	346,603
Global ECS (b)	81,099		72,921		158,458		115,354
Corporate (c)	(67,613)		(58,144)		(134,852)		(127,040)
Consolidated	$	340,522	$	196,613	$	640,025	$	334,917


NON-GAAP SEGMENT RECONCILIATION

	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020

Global components operating income, as reported	$	327,036	$	181,836	$	616,419	$	346,603
Intangible assets amortization expense	6,995		7,259		13,999		14,639
Impairments	4,482		—		4,482		—
Impact of wind down	—		(11,824)		—		(11,824)
AFS notes receivable reserve (recoveries)	—		197		—		(723)

Global components non-GAAP operating income	$	338,513	$	177,468	$	634,900	$	348,695

Global ECS operating income, as reported	$	81,099	$	72,921	$	158,458	$	115,354
Intangible assets amortization expense	2,321		2,475		4,643		5,050
Impairments	—		4,918		—		4,918
Global ECS non-GAAP operating income	$	83,420	$	80,314	$	163,101	$	125,322


Third-Quarter 2021 Outlook
	Reported GAAP measure	Intangible amortization expense	Restructuring & integration charges	Non-GAAP measure
Net income per diluted share	$3.24 - $3.40	$.09	$.09	$3.42 - $3.58


ARROW ELECTRONICS, INC. 9201 E. DRY CREEK ROAD CENTENNIAL, CO 80112 303-824-4000						NEWS